Loan Modification Breaking News: Loan Modification Companies Going Belly Up

While one would think that it would be easier to modify their troubling mortgage loan, especially with a financial incentive from the government given to the bank, this is not the case. Roughly 500,000 homeowners have entered the Obama administration's Home Affordable Modification Program (HAMP). A large percentage of this 500,000 will not qualify or never submit all of the required documentation. Only about 1,200 borrowers of the 200,000 attempting to enter the program last July have entered the permanent modification phase.


There are a couple of factors involved here, many mortgage loan servicing companies are not interested in modifying loans because they have too much to lose. (click here to receive free report) The other thing is that all the programs that are offered to the homeowner either raises their payment or is only slightly improves what they had and 55% default within the first 6 months. This leaves the homeowner virtually helpless and at the mercy of their mortgage company. Quite frankly this pisses me off. If you read my article "Loan Modification Frustration...The Dark Side of the Process" mortgage companies make it difficult to navigate trough the system. The average person will quite trying and walk away from their homes.


The only way to really combat against the games the mortgage companies are playing is to have a forensic audit done on your existing loan coupled with a loan modification. What is a Forensic loan audit you may ask? A forensic loan audit is a thorough examination of a homeowner's loan documentation. Loan audits first run the loan documentation is scrubbed to catch discrepancies in the loan application. The documentation is then studied by underwriters-professionals that work for lenders to ensure a loan application meets lender guidelines prior to a loan funding-to find any violations that may have been missed by the initial analysis. The results of the audit are then sent to a team of legal experts who draft a letter to the lenders pointing out the discrepancies and aggressively suggest that a loan modification would be a better solution for the lender than litigation. This is a very aggressive but highly effective procedure.

Real Estate Expert America Foy says,

The results of forensic loan audits are used as leverage with lenders. Most lenders, when presented with evidence proving a loan they funded has violated state or federal regulations, opt to modify a loan instead of going to court. The loan audit may provide evidence for homeowners that currently are not able to modify their loan to modify their loan.

Who might qualify for or consider a forensic audit review?

• If your loan was written in or after 2000

• If your loan qualified with very limited documentation or stated income and assets

• If a full appraisal was not done just a drive by of the property

• If you have an ARM, Interest Only or Pick a Pay loan


I predict that in the next 6-8 months more companies will pop up offering forensic loan audits. However very few will be able to offer both in one package. Recently CA has enacted a new law commonly known as SB 94. SB 94 prohibits advance fees for Loan modifications. Other states are certain to follow suit. Many companies were not compliant when they were offering just loan modifications and many were scams not able to do the service any way, but a company able to do both effectively will be 100% Compliant with the law.


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